I just created an annotated list of links on learning/experience curves, deliberate R&D, and other forms of endogenous energy technology, including a few models and empirical estimates. See del.icio.us/tomfid for details. Comments with more references will be greatly appreciated!

Like many states, Alaska has completed inventories of GHG emissions and potential climate impacts and identified early action items. Impacts are addressed in a joint commission report. I’ve read or skimmed a number of similar efforts from other states, and I have to say that this is the least coherent. It summarizes,

As has been often repeated, the State of Alaska is at the leading edge of impacts resulting from a warming climate. The Commission has recognized many negative and expensive effects of anticipated climate change. There are potential, positive eventualities, as well. The Commission’s concern over a reduction in federal spending implies an increased level of state spending may be in demand.

The report then scrupulously focuses on the positives, and stuffs the negatives to the back of each section. Unlike some states’ efforts, early actions identified by Governor Palin’s climate subcabinet focus exclusively on adaptation.

A mitigation working group is just getting started on a catalog of policies. The group’s first meeting notes contain a statement of purpose from commissioner Hartig:

The Governor appointed this committee because:

No debate on climate change, it’s now

Relatively small changes in atmosphere have significant effect on the environment.

Warming will have effects on habitats
o Less sea ice
o More intense forest fires, more insects
o Change in distribution of species
o Appearance of new species.

Our world shares one atmosphere ’“ there’s no opting out

We can build strategy from ground up, without unintended consequences

We all must take responsibility

The inventory shows the effects Alaska can have are unique and shows opportunities

Emissions reductions may not be difficult and there could be many ancillary benefits

If we fail to act there could be repercussions in the market

State lead-by-example will be an important part of state government leadership

Governor wants info and analysis of cap-and-trade, how it affects residents of Alaska

Among other things, I think Alaska’s efforts illustrate a common difficulty in climate policy: complex instruments like a cap & trade system require a major market design effort, which is hard for a state of 670,000 inhabitants to sustain. Small states either need to pursue simpler instruments (like a carbon tax) or pool their resources.

Near and dear to me is another state, small in population and big in resources. Montana has followed the CCS framework, preparing a GHG inventory and action plan. As elsewhere, there’s lots of detailed analysis, but not much evidence of models to glue it all together.

EPA’s MOBILE6 model, for GHG and other pollutant emissions from vehicles.

Lifecycle analyses, including GREET, examining the implications of a transition to coal-to-liquids transport fuel (CTL) – particularly relevant given Montana’s huge coal reserves (120 gigatons) and synfuel aspirations. The basic message, nicely discussed by Brandt & Farrell, is that use of CTL and other low-grade petroleum resources could lead to significant recarbonization of energy use, even with CCS.

RGGI

I took a brief look at RGGI in the first installment. Now trading is about to launch, with an initial auction on September 25. Individuals can bid if they have an account on the allowance tracking system (felons need not apply though). New York DEC has a useful brief explanation of the market. Significantly, NY is auctioning nearly 100% of allowances. However, it’s also one of four states that didn’t get their act together in time for the initial auction.

RGGI futures are now trading on the CCX, barely above minimums because the market is overallocated, with allowances above historic levels through 2014. As of yesterday, CCFE RGGI futures for ’08 to ’12 settled at $4.48 to $5.01 on low volume. Evidently RGGI can retire allowances that fail to meet the auction reserve price, but changing underlying allocations could take up to three years.

Just after writing my last post on China, I found this remarkably candid SpiegelOnline interview with Pan Yue, China’s Deputy Minister of Environment. A few excerpts:

…Pan: Of course I am pleased with the success of China’s economy. But at the same time I am worried. We are using too many raw materials to sustain this growth. To produce goods worth $10,000, for example, we need seven times more resources than Japan, nearly six times more than the United States and, perhaps most embarrassing, nearly three times more than India. Things can’t, nor should they be allowed to go on like that.
…Pan: This miracle will end soon because the environment can no longer keep pace. Acid rain is falling on one third of the Chinese territory, half of the water in our seven largest rivers is completely useless, while one fourth of our citizens does not have access to clean drinking water. One third of the urban population is breathing polluted air, and less than 20 percent of the trash in cities is treated and processed in an environmentally sustainable manner. Finally, five of the ten most polluted cities worldwide are in China.

Pan: …Because air and water are polluted, we are losing between 8 and 15 percent of our gross domestic product. And that doesn’t include the costs for health. …

While I was building an electric power model for China in 2005, I saw estimates of 7% GDP losses from health impacts of air pollution, so this strikes me as plausible. One could argue that even 20% of GDP lost to pollution would not be a big deal, because it represents less than three years of growth. But that is to ignore a fundamental valuation problem: that increased material consumption is probably a poor substitute for lost environmental services and especially health problems. In a utopian world where China’s development path reflected individual preferences, are these the choices we would see?

SPIEGEL: But the economic growth fanatics in Beijing will still likely carry on just as before.

Pan: They’re still playing the lead role — for now. For them, the gross domestic product is the only yardstick by which to gauge the government’s performance. But we are also making another mistake: We are convinced that a prospering economy automatically goes hand in hand with political stability. And I think that’s a major blunder. The faster the economy grows, the more quickly we will run the risk of a political crisis if the political reforms cannot keep pace. If the gap between the poor and the rich widens, then regions within China and the society as a whole will become unstable. If our democracy and our legal system lag behind the overall economic development, various groups in the population won’t be able to protect their own interests.

This is crucial. Even communities in the developed world that experience rapid growth go through substantial pain. In part, that’s because growth puts pressure on resources (like open space, freedom from noise and pollution) previously regarded as free, for which property rights or other control mechanisms must be established. If institutions don’t keep up, conflict ensues.

And there’s yet another mistake in this thinking…..

SPIEGEL: Which one?

Pan: It’s the assumption that the economic growth will give us the financial resources to cope with the crises surrounding the environment, raw materials, and population growth.

SPIEGEL: Why can’t that work?

Pan: There won’t be enough money, and we are simply running out of time. Developed countries with a per capita gross national product of $8,000 to $10,000 can afford that, but we cannot. Before we reach $4,000 per person, different crises in all shapes and forms will hit us. Economically we won’t be strong enough to overcome them.

Counting on future growth to solve the problems of past growth is a classic escalation trap – Herman Daly’s “Hair of the Dog that Bit You” from the Catechism of Growth Fallacies in Steady State Economics. Daly cites Wallich, “Growth is a substitute for equality of income. So long as there is growth there is hope, and that makes large income differentials tolerable.” When the growth engine sputters, the social repercussions will be serious.

U.S. Republicans called on Monday for an end to a controversial requirement that gasoline contain a set amount of ethanol, a policy backed by the Bush administration that critics say has helped drive up world food prices.

In their 2008 platform detailing policy positions, Republicans said markets — not government — should determine how much ethanol is blended into gasoline, and pushed for development of a cellulosic version, which could be made from grasses rather than corn.

It will be interesting to see what this implies for California’s LCFS design.

That’s the title of a letter in the latest edition of Science. It nicely expands on some of my earlier concerns about China’s energy policy in the Clout & Climate Change war game and in reality. The author, Quiang Wang of the Guangzhou Institute of Geochemistry, writes,

…

China’s energy prices are mainly decided and controlled by the government. Because the government emphasizes social stability over scarcity of resources or environmental cost, it sets the energy prices very low. For example, Chinese gasoline and diesel prices rose by less than 10% in 2007, when global oil price nearly doubled. Moreover, in January 2008, the Chinese government decided to freeze energy prices in the near term, even as international crude oil futures have continued to surge.

Energy conservation and efficiency are hard to achieve because government-set prices encourage excessive energy consumption and waste. The low energy prices send a distorted market signal to consumers that there is no shortage of natural resources, indicating that enhancing energy efficiency is unnecessary and waste is justified.

…

A market-oriented energy-pricing mechanism is an inevitable requirement for China to address climate change, although the reform of the energy pricing mechanism means increased energy prices, which will bring public dissatisfaction and possibly social instability.

In 2005, I built a simple model of the Chinese electric power system, focused on coal-fired generation. One of the most beneficial strategies in the model is to make plant dispatch and power pricing more market-oriented, strengthening the incentive to install cleaner generation and retire or retrofit old dirties. That’s tough to implement as long as utilities wield more power than their regulators.

Today at Balaton I heard from Hunter Lovins about WalMart’s sustainability efforts. It’s tempting to question their motives and the likely outcome, but there’s enough going on that EDF is creating a presence in Bentonville. As of today, sustainability features prominently on WalMart’s home page. It’s hard to get excited about their Love, Earth jewelry line, but some of their other activitiesÂ could have a significant impact. They have some very interesting initiatives, like product labeling for green content based on life cycle analysis (learning from Patagonia).

A few quickÂ reflections:

WalMart’s traditional focus has been cost-saving efficiencies. That can take place through two paths: genuine innovation (good) and pushing costs off on society as externalities (pollution, social consequences of labor policy, etc. – bad). If WalMart’s sustainability efforts represent calling off the latter, that’s a good thing. However, as long as institutions and consumer preferences don’t support verification of such efforts in general, it makes WalMart susceptible to competitors with fewer scruples.

Historically, WalMart’s efforts to outrun its competitors and squeeze value out of its supply chain reduce diversity and enhance its market power. That means we have fewer experiments (and resources) with which to explore ideas – a classic case of optimization of a complex system for a single purpose that inadvertently makes it fragileÂ inÂ changing conditions.

It’s easy to see how dematerializing the supply chain is helpful. As material constraints increasingly become important, the same efficiencies that currently are frequently consumed by rebound effects could become a vehicle for the delivery of greater good per scarce megawatt, TonC, or bushel. However, there’s a second key component of greening the world, which is simply consuming less. It’s easy to see how a cutting edge company can make money selling greener products. It’s not so easy for me to see how a company is going to make money from people trading fewer goods and services for more leisure time or other non-market activity.

This suggests three priorities:

Encourage propagation of this idea, so that brown suppliers dumped by WalMart aren’t simply scooped up by Kmart.

Help chains to thinkÂ more deeply about supply chain diversity and how procurement and social practices contribute to resilience.

I presented a brief review of my involvement in the CNAS wargame at Balaton today. My last fewÂ slidesÂ focus on some observations from the game.Â They led to a very interesting conversation about targets for future models and games. We have been planning to continue seeking ways to insert models into negotiations, with the goal of connecting individual parties’ positions to aggregate global outcomes. However, in the conversation we identified a much more ambitious goal: reframing the whole negotiation process.

The fundamental problem, in the war game and the real world, is that nations are stuck in a lose-lose paradigm: who will bear the burden of costly mitigation? No one is willing to forego growth, as long as “growth is good” is an unqualified mantra. What negotiations need is a combination of realization that growth founded on externalizing costs of pollution and depletion isn’t really good, and that fixing the institutional and behavioral factors that would unleash large low- or negative-cost emissions reductionsÂ and cobenefits wouldÂ be a win-win. That, combined with a serious and equitable accounting of climate impacts within the scope of present activities and coupling of adaptation and development opportunities to mitigation could tilt the landscape in favor of a meaningful agreement.

I’m at the 2008 Balaton Group meeting, where a unique confluence of modeling talent, philosophy, history, activist know-how, compassion and thirst for sustainability makes it hard to go 5 minutes without having a Big Idea.

Our premeeting tackled Ethics, Values, and the Next Generation of Energy and Climate Modeling. I presented a primer on discounting and welfare in integrated assessment modeling, based on a document I wrote for last year’s meeting, translating some of the issues raised by the Stern Review and critiques into plainer language. Along the way, I kept a running list of assumptions in models and modeling processes that have ethical/equity implications.

There are three broad insights:

Technical choices in models have ethical implications. For example, choices about the representation of technology and resource constraints determine whether a model explores a parameter space where “growing to help the poor” is a good idea or not.

Modelers’ prescriptive and descriptive uses of discounting and other explicit choices with ethical implications are often not clearly distinguished.

Decision makers have no clue how the items above influence model outcomes, and do not in any case operate at that level of description.

My list of ethical issues is long and somewhat overlapping. Perhaps in part that is due to the fact that I compiled it with no clear definition of ‘ethics’ in mind. However, I think it’s also due to the fact that there are inevitably large gray areas in practice, accentuated by the fact that the issue doesn’t receive much formal attention. Here goes: Continue reading “Ethics, Equity & Models”

The Minnesota Next Generation Energy Act establishes a goal of reducing GHG emissions by 15% by 2015, 30% by 2025, and 80% by 2050, relative to 2005 levels.

From ScienceDaily comes news of a new research report from University of Minnesota’s Center fro Transportation Studies. The study looks at options for reducing transport emissions. Interestingly, transport represents 24% of MN emissions, vs. more than 40% in CA. The study decomposes emissions according to a variant of the IPAT identity,

Vehicle and fuel effects are then modeled with LEAP, an energy modeling platform with a fast-growing following. The VMT portion is tackled with a spreadsheet calculator from CCAP’s Guidebook. I haven’t had much time to examine the latter, but it considers a rich set of options and looks like at least a useful repository of data. However, it’s a static framework, and land use-transportation interactions are highly dynamic. I’d expect it to be a useful way to construct alternative transport system visions, but not much help determining how to get there from here.

OK, it’s not a US region, but maybe we could trade it for NorthDakota. BC has a revenue-neutral carbon tax, supplemented by a number of other initiatives. The tax starts at $10/TonCO2 and rises $5/year to $30 by 2012. The tax is offset by low-income tax credits and 2 to 5% reductions in lower income tax brackets; business tax reductions match personal tax reductions in roughly a 1:2 ratio.

BC’s Climate Action Plan includes a quantitative analysis of proposed policies, based on the CIMS model. CIMS is a detailed energy model coupled to a macroeconomic module that generates energy service demands. CIMS sounds a lot like DOE’s NEMS, which means that it could be useful for determining near-term effects of policies with some detail. However, it’s probably way too big to modify quickly to try out-of-the-box ideas, estimate parameters by calibration against history, or perform Monte Carlo simulations to appreciate the uncertainty around an answer.

The BC tax demonstrates a huge advantage of a carbon tax over cap & trade: it can be implemented quickly. The tax was introduced in the Feb. 19 budget, and switched on July 1st. By contrast, the WCI and California cap & trade systems have been underway much longer, and still are no where near going live. The EU ETS was authorized in 2003, turned on in 2005, and still isn’t dialed in (plus it has narrower sector coverage). Why so fast? It’s simple – there’s no trading infrastructure to design, no price uncertainty to worry about, and no wrangling over allowance allocations (though the flip side of the last point is that there’s also no transient compensation for carbon-intensive industries).